I thought I would try and follow up with my call with GreenSafe’s founder and former President and Chairman. Heck, what did I have to lose on this overcast July 4th holiday? Whoever answered the call put me through to Mr. Swire’s office immediately.
I asked Mr. Swire what he could tell me about the deal between BGMO and GreenSafe. He said that he could answer only those parts that were part of the public domain.
Swire said that from data posted on the GreenSafe website, the firm hired Hal Wolfe at Blue Light Capital to raise funds for GreenSafe. After meeting with a number of potential partners, Mr. Wolfe presented the Bergamo deal to Swire. Swire said the BGMO was promoting itself as an investor or co-investor in green energy and water projects. It was only in the early fall of 2009 that BGMO advised GreenSafe that the funding for GreenSafe would be flowing through BGMO from various trading platforms.
The reported firm funding agreement (not a best efforts funding) was for an investment of $ 120 million ($ 50 million as equity and $ 70 million as sub debt). In exchange, BGMO would own 60% of GreenSafe. After a number of callers to the GreenSafe offices some of which were media types, BGMO issued a statement that they were in discussions with GS. The deal was finally sealed in early December 2009. Amongst other things, it called for the full $ 50 million cash payment for the equity by the end of December.
Swire recalled that after the December 9th ground breaking, Herzog made two statements.
First, he asked that we do not cash the BIG cheque until the end of the month. This was to match the timing of the closing. I had asked why not defer the ground breaking until the cash was in the bank, Swire reported that BGMO represented that the cheque would be good for endorsement at year end. Further, given Herzog’s travel commitments and the availability of certain Ministers to be in attendance, this was the best timing.
Under Canadian law, that BIG poster sized cheque was legal as it had all of the right coding on it. Swire said that he believes that Kennedy still has the BIG cheque in his possession.
The second dealt with one modest part of the agreement which BGMO was going to ignore. He would not go into greater detail.
I asked Swire if Herzog had produced proof of the funds. Mr. Swire responded that Herzog had several folios of documents with funding details and timelines. He did not allow Swire to make copies of them.
In early January 2010, BGMO asked to amend the deal. Swire explained that since BGMO was planning to generate its investment capital from the trading platform which involved leveraged positions in currencies, government bonds and index futures that they wanted to stretch the payouts through to the spring. Herzog advised Swire that Bergamo had also made commitments for other acquisitions which were to happen at the same time.
I don’t really know what Swire is talking about here but is sounds complicated and risky.
After talking to his management team, Swire reported that he got back to Herzog saying that “as long as it met the timing for the progress payments on the building and equipment, we were fine with the deferral”.
By March, Swire recalled, that BGMO wanted the deal done through a new BGMO subsidiary based in the UAE. There was also a related BGMO subsidiary created in the UK at the same time to act as a conduit for third party funds. I do recall seeing the UAE item on the GS website.
In the spring of 2010, BGMO still had not delivered the required funds even under the amending agreement. GreenSafe went out and secured low cost financing from a well-known German bank but it was conditional on BGMO coming through with some capital or GreenSafe finding another equity partner.
I asked Swire what happened in the late fall of 2010. Swire stated that since the deal with BGMO was not closed and was not renounced by either party, one of the GS directors went to Herzog to see if he was in a position to craft a new deal and fund it promptly. Herzog replied that he could.
A new deal was struck which saw BGMO still keeping the 60% ownership of GreenSafe. What happened between the December 2010 GS-BGMO deal and what was concluded in January 2011, Swire refused to discuss. Other than saying that it was clear that BGMO was taking over GreenSafe there was another tidbit. Swire did say that any party with a vested interest could under various pieces of legislation obtain copies of the buyout agreement with the supporting corporate and personal covenants, guarantees and related representations. I asked Swire if Bergamo funded his buyout or was party to the agreement. He declined to answer directly. He said that the remaining GS directors did not have the personal resources for the cash buyout.
He added that he was happy to be out of GreenSafe. I wonder if this implies that he was happy to be at a greater distance away from BGMO.
I asked Swire if he knows what is going on with GreenSafe now. He replied by saying that he is out of GreenSafe and after sending the files to the new NB head office, he has had no real contact with them. Swire had heard on the local TV station that they were trying to build a plant in Fort Erie, just across the river from me but does not know how that is progressing. He does not know if they have moved to different locations. Swire did say that “he was the lucky one. The former staff at GreenSafe was terminated without notice nor the payment of the salaries rightfully due them”.
I went on to ask Mr. Swire what he knew about the Bergamo solar project. He said that he did have some correspondence with the head of that firm after it soured. Swire did have some sympathy for that firm’s founder.
I asked him if he knew anything of Vistagen. Swire said “nothing at all”. After telling him of the share purchase agreement and the amendments, I asked him what he thought. “Without knowing the people involved, I would say from the publicly reported experience of the repeated amendments and deferrals with GreenSafe, that they should use their best judgment”. Swire also suggested that there may also be parallels with the Solar story. “The one thing that professionals involved in the behavioural sciences are in full agreement with is that past patterns are a good indicator of future actions”.
I squeezed in one final GreenSafe question. Assuming that BGMO does have the money this time, what do you think BGMO should do with GreenSafe. “I have not heard anything that officially cancelled the 2011 deal between them”. “Given its likely profitability or even greatly discounting its likely cashflows”, Swire said “that BGMO would be best advised to build one plant and discharge all of the previous obligations of GreenSafe so that there are no ghosts in the closet”. Swire did say that he learned that one US demanufacturer is now using equipment that was originally scoped for the Caraquet plant.
As for a final question, I asked Swire what he is doing now. He replied by saying that since there weren’t any non-compete agreements, Swire has furthered his recycling interests.
